Egypt Halts Gas Flow to Israel, Jordan After Pipeline Blast

Natural-gas flows from Egypt to
Israel halted after an explosion on the Sinai pipeline network
that delivers the fuel, Egyptian and Israeli officials said.

Exports to Jordan and some domestic supplies were also
suspended because of the blast, Egypt’s Oil Ministry said today
in an e-mailed statement.

“An alleged terror attack” at about 1 a.m. local time
caused an explosion near the city of El Arish, said Ampal-
American Israel Corp. (AMPL), which owns 12.5 percent of East
Mediterranean Gas Co., the company transporting Egyptian gas to
Israel. Ampal shares fell 0.2 percent in Tel Aviv trading.

The attack was the ninth affecting gas pipeline
infrastructure in the Sinai since February, when a popular
uprising forced former Egyptian President Hosni Mubarak to
resign. Egyptian opposition groups have criticized sales of the
fuel to Israel, which has relied on Egyptian gas to generate 40
percent of its electricity.

The attack highlights Egypt’s challenge in securing the
pipeline and threatens to worsen its already soured ties with
its eastern neighbor.

Magdy Tawfik, chairman of Egyptian Natural Gas Co., said
unidentified men planted three explosives, two of which
detonated and caused a fire that was later extinguished,
according to the ministry statement. The extent of the damage is
unknown, Ampal said in an e-mailed statement.

‘Easy Target’

The attack coincided with the start of voting in the
country’s first election since the toppling of Mubarak as the
police and the military, which is currently running the country,
focus their efforts on security at polling stations.

“Securing this pipeline has proved very hard for the
Egyptian authorities as they just don’t have the manpower in the
area to be able to monitor every inch of it, making it very easy
for militants to attack it,” Alan Fraser, a Middle East analyst
at U.K. risk consultants AKE Group, said. “The fact that it was
attacked on the first day of the elections was probably to gain
more media attention. The militants obviously want to make a
political point, and what better way to do it than taking
attention away from the first democratic elections following the
toppling of Mubarak.”

Replacing Egyptian gas with more expensive diesel fuel cost
the Israeli economy an average of 10 million shekels ($2.6
million) a day during the summer, Israel’s National
Infrastructures Ministry said. Israel Electric Corp. said it may
need to raise rates by as much as 30 percent next year. Ampal,
which has fallen 85 percent this year, dropped to 1.28 shekels
at 3:43 p.m. in Tel Aviv trading.

Not Last Time

“I think it’s clear this won’t be the last time the
pipeline is attacked,” Fraser said. “We may see regular
attacks until we see some sort of change in relations with
Israel, and the export of gas between the two.”

Relations between Israel and Egypt have chilled since the
January uprising that overthrew Egyptian President Mubarak,
straining a three-decade peace treaty between the countries.
Egypt’s ruling military council declared a state of emergency to
restore order after protesters in Cairo attacked the Israeli
embassy on Sept. 9, forcing an evacuation of diplomatic
personnel.

East Mediterranean Gas filed a request in October for
arbitration with the International Chamber of Commerce, seeking
compensation from Egyptian General Petroleum Corp. and Egyptian
Natural Gas Holding Co. for damages incurred due to the frequent
interruptions of gas supplies.